Your tax extension is running out — here's what to do

Procrastinated on doing your taxes amid 2020's COVID chaos? You’re among millions of Americans who requested extensions during this year of distractions, to put things mildly.

But if you were granted the delay to file your 2019 federal return, the extra time is almost up. Your paperwork is due Oct. 15.

Even during normal years, the IRS will give you a longer deadline for submitting your return. But this was no normal year; because of the pandemic, the regular April 15 due date was moved to July 15.

Still, the mid-October extension deadline is the same as in previous years. And note that if you haven’t yet paid any taxes due, you’re late. The IRS should have received that money by July 15, the belated Tax Day.

Here are some tips on what to do now.

You need to pay the IRS

If you still owe money on your 2019 federal return, estimate your tax bill and pay as much as possible as soon as you can.

A tax bill that wasn’t paid by the July deadline is subject to late fees and interest, even if you were granted the extension to get your return in. If you don’t file or pay by the Oct. 15 deadline, the penalties could get even worse.

The IRS charges a penalty of 5% of the unpaid taxes for each month your return and payment are late, up to a maximum 25%. You'll also be charged interest on the delayed taxes.

Can’t afford to pay the full amount? You should still file your return by the Oct. 15 extension deadline, then contact the IRS to see if you qualify for a relief program, like an installment plan.

Meanwhile, if you’re owed a refund, you’ll need to file a tax return before the IRS will fork over your funds. And the tax agency will only make good on an overdue refund for three years, so the sooner you file, the better off you’ll be.

Some taxpayers are automatically eligible for further extensions:

• Members of the military serving in combat zones generally have 180 days after they leave the zone to file their tax returns.

• Taxpayers affected by natural disasters also automatically qualify for a lengthier extension. Visit the disaster relief page on the IRS website for more information.

You need to submit your return

If you do owe the IRS money, you should estimate the amount and pay it immediately to avoid further late fees. Taxpayers can make their payments online, over the phone, or even with the IRS2Go app on their mobile phones.

If you’re ready to file, you can use tax preparation software to make the process a lot less complicated.

Or visit a tax preparation specialist to help you complete and file your tax return. Just try not to show up on Oct. 15.

Reduce your tax bill for next time

Does your tax bill feel a bit bloated? Here are six ways you can trim it in time for next year.

1. Contribute to a 401(k) or traditional IRA. Putting money into a pretax retirement account will reduce your taxable income, and in turn reduce the amount owed to the IRS. Seek out expert financial planning advice — which is even available online now — to make the best choices for your retirement goals.

2. Contribute to an IRA. Contributions to traditional IRAs are tax-deductible if you meet certain criteria, and there are strict limits on what you can deduct. If you don’t have an IRA, you can start one using just your spare change.

3. Leverage your student loan. If you’re still paying off those pesky student loans, you might be able to leverage that debt into tax savings. You can deduct up to $2,500 in interest paid on student loans each year, as long as you earn less than $70,000.

4. Turn medical expenses into tax savings. If you had any major medical expenses in the past year, you may be able to get a big, fat tax deduction for them. Any qualified medical or dental expenses that exceed 7.5% of your adjusted gross income for the 2020 tax year can be deducted, if you have enough write-offs to itemize. Hefty out-of-pocket costs may be a sign that it’s time to shop for a new health insurance, if you buy your own.

5. Get expert help. If you want to make sure you’re paying the lowest amount possible, get help from experts, like the tax pros at H&R Block. In addition to possibly cutting your tax bill, the professional assistance will lower your stress levels, too.